The Japanese yen remains higher in early trade with China’s manufacturing sector still in contraction. The HSBC final manufacturing PMI data showed further slowdown, ticking lower from 48.3 to 48.1. Analysts were expecting a modest move higher to 48.4. This is the fourth consecutive month under 50, which indicates slower growth expansion.
The yen, also, is elevated due to the uncertainty on whether or not the Bank of Japan (BoJ) will implement additional stimulus. BoJ Governor Haruhiko Kuroda is confident that the economic recovery is on track, sending the USDJPY below the key 102 support level. The pair is seeing additional weakness with the dollar modestly lower.
Federal Reserve chairwomen Janet Yellen will be testifying in front of Congress on speculation the central bank will keep rates near zero after, what some may say is, encouraging data. Yellen has repeated the stand that rates will remain accommodation and near zero for an indefinite period of time.
USDJPY has been held steady underneath 102 support in early Asian trade. Price action have found support at the 78.6 percent Fibonacci retracement from the 30-day low, 101.91. The 4H chart is indicating a bearish +/- DMI crossover that should support the current move downward. Prior to testing the 30-day low at 101.31, support levels at 101.70 and 101.50 will be testing.
However, if the 78.6 Fibonnaci level holds, price action could attempt to close above 102. Resistance will be found between 102.10/15, while a deeper retracement is probable at 102.20/25.
Today, economic data is light. The US non-manufacturing PMI data is due out at 10:00 EST, while the Australian trade balance will cause volatility in tomorrow’s Asian session. Look for the dollar to trade sideways with bearish sentiment ahead of Yellen’s testimony on Wednesday. The yen will likely continue to hold headline risk with continued geopolitical tension in Eastern Europe.